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Kinder to Take Over Copano - Analyst Blog

Kinder Morgan Energy Partners L.P.
(
KMP
) has plans to take over
Copano Energy LLC
(
CPNO
) for about $3.22 billion in stock. This would spread Kinder
Morgan's footprint in Texas, Oklahoma and Wyoming. The purchase
price will reach about $5 billion including debt.

Per the deal, Copano shareholders will get $40.91 per share,
which is a 23.5% premium to Copano's closing price of $33.13 on
Jan 29. Shares of Kinder Morgan - which agreed to pay 0.4563
share for each Copano share - closed at $89.66 on Tuesday on the
New York Stock Exchange.

The boards of directors of both the companies approved this unit
for unit agreement, which is expected to close in the third
quarter of 2013. The deal is yet to pass the customary closing
conditions that include regulatory approval and a vote of the
Copano unitholders. With more than 14% stake Copano's largest
shareholder − TPG Capital Management LP − has already given its
green signal to the deal.

A midstream entity with operations mainly in Texas, Oklahoma and
Wyoming, Copano has throughput capacity of 2.7 billion cubic feet
per day (Bcf/d), and over 1 Bcf/d of processing capacity and 315
million cubic feet per day of treating capacity. It has 9
processing plants and holds shares or operates about 6,900 miles
of pipelines.

This Copano acquisition will facilitate Kinder Morgan to pursue
development activities in the prolific Eagle Ford Shale areas of
South Texas and also allow it to enter the Barnett Shale Combo in
north Texas as well as the Mississippi Lime and Woodford shales
in Oklahoma.

Kinder Morgan is one of the largest publicly traded master
limited partnerships (MLPs) and generally serves as a benchmark
for the pipeline MLP group.
Kinder Morgan Inc
. (
KMI
), one of the largest mid-stream energy companies in the U.S.,
owns the partnership's general partner interest.

Last year's purchase of El Paso Corp for $38 billion positioned
Kinder Morgan as the largest midstream company in North America.
It expanded its portfolio further with the addition of Tennessee
Gas Pipeline (TGP) and a portion of El Paso Natural Gas (EPNG)
with this acquisition. Various agreements and modifications are
lined up in the coming years with these assets, which are
expected to augment the partnership's revenues.

Kinder Morgan retains a Zacks Rank #3 (Hold), implying that it is
expected to perform in line with the broader U.S. equity market
over the next one to three months.

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